How to gain if rates start to drop

The surprise cut in American interest rates could mark the start of the end of the market crisis

America's Federal Reserve last week slashed interest rates for the first time in four years, and many of Britain's leading economists are hopeful that the UK will follow its lead.

Even though a rate cut could still be some months off, investors are being urged to prepare their portfolio for lower rates - and borrowers are being advised to reassess their mortgage deals.

Hopes that the next move will be down have been boosted by news that the consumer prices index, the government's preferred measure of inflation, fell to 1.8% in August, from July's 1.9% and 2.4% in June.

Richard Dingwall-Smith, chief economist at Scottish Widows Investment Partnership, said: "The Federal Reserve's decision to cut the funds rate by 50 basis points to 4.75% was a decisive move. A modest cut in UK rates over the next six months is also looking increasingly likely."